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FCC asked to make AT&T/Bell South merger contingent on neutrality protections

As the Federal Communications Commission mulls conditions on AT&T Inc.'s $83 billion merger with BellSouth Corp., the commission faces pressure to turn the process into a fight over network neutrality, the concept that Internet service providers like AT&T should treat all traffic the same.

It's pressure, experts add, that the FCC is likely to resist.

Net neutrality proponents — consumer groups and Internet companies like Google, among them — worry San Antonio-based AT&T wants to create a two-tiered Internet where it picks which sites thrive and which flounder.

And some now view the debate over deal conditions as their golden opportunity to make AT&T sign off on net neutrality protections before it closes the largest telecom deal in history.

"(AT&T) wants this merger to happen before the end of the year," said Gigi Sohn, president of Public Knowledge, which filed comments Tuesday asking the FCC to make AT&T treat all Internet content equally. "I think that's the biggest card we hold."

The FCC originally was set to rule on the merger Oct. 12, but pushed back its vote to Nov. 3 after commissioners reached an impasse over what conditions, if any, to impose on the deal. Republican FCC Chairman Kevin Martin proposed approving the merger without conditions, but the two Democrats commissioners said they wanted to see consumer-friendly safeguards.
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In response, AT&T offered a set of conditions to which it would agree, including making speedy Web access available for $10 a month if bundled with phone service and not increasing rates competitors pay to access its networks.

Competitors and consumer groups had until Tuesday to file remarks about the AT&T proposals.

Analysts said they would be surprised if the FCC deviates too far from the conditions AT&T has already offered up — especially into territory as controversial as net neutrality. So far, the Justice Department and 18 states have approved the transaction, making the FCC its last regulatory hurdle to clear.

"I think pretty much what AT&T proposed will be accepted," said Patrick Comack, telecom analyst for Zachary Investment Research in Miami. "The Democrats on the FCC want to show they won something for consumers, but they aren't going to end up pushing AT&T around too much, especially on net neutrality."

While the FCC faces pressure to do something about net neutrality, analysts say the AT&T-BellSouth merger is unlikely to be the forum where it chooses to do so. Congress debated net neutrality this year amid heavy lobbying from the telecom and tech industries but never brought legislation to a floor vote.

"The FCC is not going to set policy for a whole industry based on concessions on one merger," Frost Bank analyst Le Keough said.

AT&T blasted the net neutrality demands, saying that they "smack of public relations-driven opportunism as opposed to a thoughtful approach to policymaking." In its proposed conditions, AT&T said it would abide for 30 months by net neutrality rules the FCC adopted last year.

"The proper place to be debating the pros and cons of net neutrality is in the U.S. Congress or in an industry-wide proceeding at the FCC," said Jim Cicconi, AT&T senior executive vice president external affairs.

Even some merger critics said they're not holding out hope that the FCC will make the company sign off on stringent new net neutrality guarantees. More realistic to expect, they add, are conditions that would offer consumers low-cost broadband and protect rivals that sell to business customers inside the merged AT&T-BellSouth's territory.

"This particular FCC has basically done nothing to stop these mergers," said Bruce Kushnick of watchdog group TeleTruth. "They're not going to make any controversial requirements at this point, especially not on something like net neutrality."

The FCC is split 3-2 in favor of Republicans, but one Republican commissioner, Robert McDowell, will abstain from the vote since he previously worked for a group that represented AT&T and BellSouth competitors. That gives the panel an even partisan split.

The media's job is to interest the public in the public interest. -John Dewey

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